The UK Small Business Confidence Report 2025

Small businesses in the UK are facing a wide range of challenges, from supply chain disruptions to shifting consumer demand, and it’s why capturing the voice of the UK’s small business community has become so much more important in recent years.

Enter the New UK Small Business Confidence Report 2025 by SumUp. The survey draws on feedback from 750 different owners and decision-makers, and sees them sharing their thoughts, challenges, and outlook for the year ahead.

The report explores everything from growth expectations and access to finance, to staffing pressures, strategies for navigating uncertainty, and their thoughts regarding the use of AI.

Now in its second year, this report doesn’t just shine a light on today’s SME landscape, but it also compares how confidence has changed since 2024 by highlighting year-on-year shifts in optimism, risk perception, and strategic priorities – giving us a timely barometer of small-business resilience.

So, whether you’re a business owner, policymaker, investor, or entrepreneur, these insights will help you to better understand what’s driving Britain’s backbone of enterprise in 2025!

Changes in confidence among SMEs: 2024 vs 2025

To start with, we asked business owners and decision-makers how confident they felt about the future of their business over the next 12 months. In 2024, 24% were very confident and anticipated strong growth over the next year. But in 2025, this has dropped by 4% to exactly 20%.

Meanwhile, 36% in 2024 said they were somewhat confident and could see opportunities for growth, though they expected some challenges along the way. This has now also dropped by 4% over the course of the last year, leveling out at 32% in 2025.

These figures show a slight reduction in overall confidence amongst business owners and decision-makers in the UK, and there are more owners who appear to feel uncertain or neutral toward the topic, in that they either expect steady performance or are unsure what the future holds due to unpredictable factors.

In fact, this area has seen the greatest change, with 40% choosing it in 2025 compared to just 22% in 2024.

However, fewer business owners in 2025 felt concerned about the year ahead. In 2024, 10% said they were somewhat concerned and 9% were not confident at all, whereas in 2025 this has dropped to 5% and 3%, respectively.

Overall, these changes in business confidence reflect a generally positive trend. For instance, in 2025, we asked business owners how they would rate their business performance compared to the same time last year. A promising 18% said it was much stronger, 25% said it was slightly stronger, 37% reported no change, and only 15% and 4% said it felt slightly weaker or much weaker, respectively.

The main factors influencing business confidence in 2025

Every business owner and decision-maker knows that there are plenty of factors that could affect their sales and profits. So, to get a feel for what exactly is influencing business confidence, we asked them what they believe to be the strongest challenges.

Naturally, factors impacting the state of the overall UK economy (such as inflation rates, interest rates, and changes in consumer disposable income) came out as a top concern, with 40% stating it as a major challenge. This was then followed by the cost of bills (such as energy, rent, gas, and utilities), which was again pointed out by 40% of the people we surveyed.

Alongside these though, other top challenges included staying ahead of the competition (30%), finding or retaining skilled employees (22%), retaining existing customers (21%), and necessary investments in things like machinery and equipment (20%).

At the lower end of the scale, only 7% said that struggling to access funding or credit to support business growth was a primary issue.

But the number one challenge that business owners face right now appears to be rising costs in general.

Out of everyone we surveyed, 47% said that the cost of raw materials, supplies, and products was the greatest factor. And when we look into specific sectors, some are feeling this more than others, particularly in the environment and agriculture sector (80%), the beauty industry (75%), and the energy and utility sector (69%).

For comparison, only 10% of business owners and decision-makers in the law sector agreed that rising costs are the strongest challenge they face. 

What steps are UK SMEs taking to overcome current challenges?

We then asked business owners and decision-makers in the UK about the steps they were taking to stay on top of current challenges. There were some interesting answers shared, with the most popular one being that they are working on a cost-saving plan regarding their supply chain and professional services.

This included things such as switching to lower-cost suppliers, streaming logistics, and buying in bulk to secure volume discounts. Overall, 38% said that this was the case, with another similar approach being to work on other types of cost-saving plans, such as with energy, gas, and Wi-Fi (29%).

What really stood out, however, was that whilst 24% of business owners said they were lowering their prices in order to help customer retention, 25% stated they’d actually increased prices in order to protect profit margins.

There were also a few patterns in terms of innovation and creativity, with 26% introducing new products or services, 25% upskilling existing staff or hiring new talent, and 13% investing in digital tools or automation.

Less common factors also included reworking their business model to be more eco-friendly and lower energy costs (9%) and laying off staff to lower employee costs (8%). Meanwhile, 12% said that they were not taking active steps to stay on top of challenges.

The top priorities for business growth over the next 12 months

Looking ahead, we asked business owners and decision-makers for their top two priorities to facilitate business growth over the next 12 months.

Unsurprisingly, 42% said that improving profit margins was crucial, while 34% said that they planned to diversify their income streams by opening a physical store, expanding into e-commerce, selling through social media such as TikTok shop, or other diversification strategies.

Other popular answers were reducing costs or debt (33%), improving operational efficiency (20%), launching new products or services (20%), and securing funding or investment (19%).

In addition, 15% of respondents said that preparing for economic uncertainty was one of their top two priorities. However, only 10% chose investment in marketing and building brand awareness, and just 5% said that investment in market research to better understand their customer base and improve retention would be a priority.

How important is digital transformation to small businesses?

Digital transformation can take many forms, ranging from adopting innovative technologies to improving an existing digital presence, and many UK business owners and decision-makers believe that this is relevant to their businesses, with 35% noting it as very important and contributing to their overall success.

Meanwhile, a further 33% say it is somewhat important and that they’re taking small steps to improve their technology, while only 19% remained neutral, stating they were open to embracing more technology within their business but that it’s not an immediate priority.

Then there were some who said it wasn’t very important (7%) or not important to them at all (7%), seeing it as offering their business little or no value at the current time. 

The role of AI in small businesses

AI is very much a hot topic at the moment, as the technology is being applied across a wide range of sectors in increasingly creative (and often surprising) ways.

With this in mind, we asked UK business owners and decision-makers what they thought about AI; specifically, whether or not they have plans to adopt AI tools or systems in the next 12 months.

The most popular answer was that they are actively planning on using it and currently exploring its potential options (30%), with others saying they have already done so (22%), while others said that they don’t have any plans yet but may consider it after research (18%).

Others were less positive about the use of AI in business. In fact, 13% said they don’t see a current need for it, 4% said they lack the resources, skills, or budget to adopt it, and 13% stated they don’t plan to use it because they are concerned about the risks or ethics of using AI.

In addition, 27% said they see AI or emerging technologies mostly as an opportunity for their business, compared to 19% seeing it mostly as a threat that could disrupt or replace aspects of their operations. And, of course, some said it will have minimal impact (9%) or no impact (15%), and a few were uncertain (9%).

Perhaps the most interesting and rational answer was that AI presents some opportunities, but it also has its risks, with 22% choosing this option.

Our top five tips for small businesses in the UK

Given the data we collected in our survey, if you’re concerned about the future of your business, here are five practical strategies designed to help you tackle today’s challenges head-on and build lasting resilience.

1. Plan for multiple scenarios – try to map out your best-, worst-, and middle-case forecasts for revenue, cash flow, and staffing, and regularly revisit them to adjust your plans as market conditions evolve in order to meet any challenges ahead.

2. Audit and cut non-essential costs – put time aside to review all subscriptions, supplier contracts, and overheads, as some may no longer be required. You might also want to look into negotiating better terms where possible and pausing underused services until they’re required again. You can then reinvest these savings into growth-driving activities for your business.

3. Diversify your revenue streams – it’s always a good idea to explore complementary products, add subscriptions or service tiers, and target new customer segments as part of your broader business plan. After all, a broader product range or service offering will help cushion your business against downturns in any single market.

4. Use digital tools and automation – consider adopting cloud-based accounting, customer relationship management (CRM) systems, and project management platforms to streamline your workflows. You can then automate repetitive tasks such as invoicing and inventory alerts, which will free up time for developing new strategies and making sales.

5. Strengthen your cash-flow resilience – if possible, look to build or maintain a cash buffer equivalent to 3 to 6 months of your fixed costs for your business. This may be difficult initially and take time to pull together, but it will give you added peace of mind if you hit a temporary slump in sales further down the line and need to make up the shortfall.

Corin Camenisch, Product Marketing Lead at Sumup commented on the survey: “As champions for small merchants, we conducted this survey to discover the confidence levels of small business owners and decision makers in the UK to better understand the challenges they face, gauge their optimism about their future, and identify areas where support for SMEs might be needed. 

Overall, confidence levels of small business owners and decision makers across the UK are high. This positive outlook suggests that small merchants are prepared to navigate potential uncertainties and continue to thrive. 

We have provided tips off the back of our findings for those just starting out in business, or who are looking to deal with unexpected market fluctuations on our full campaign page.”

Bonus tip: Get in touch with SumUp

So, there you have it; that is the current state of business confidence in the UK as of 2025. As you can see, confidence has certainly taken a hit, but it’s also clear that business owners and decision-makers are optimistic about the road ahead!

And speaking of the future, if sorting out swift and easy payment solutions is something you struggle with, and you want to make life easier for your customers, then you’ll be thrilled to hear that SumUp has a range of payment solutions on offer, including POS and a new SumUp Terminal!

Why not contact our team today to explore how we can help your business make more sales, save on costs, and plan for ongoing success?

Methodology

This survey was conducted by the TLF panel in May 2025 and completed by 750 UK small business owners and decision-makers operating online, through brick-and-mortar stores, or via both channels.